The key to economic prosperity remains stable, transparent trade policies – IMF

The International Monetary Fund (IMF) has said in a paper on the ‘Review of the Role of Trade in the Work of the Fund’ that open, stable, and transparent trade policies remain key for economic growth and resilience and for addressing key global challenges.

Open trade has been an essential part of the global policy agenda to bolster growth, allowing millions of people to raise their living standard and exit poverty.

The Fund said diversification through trade is also crucial to improve macroeconomic resilience, as evidenced during the COVID-19 pandemic.

“Large global gains remain to be derived from further trade reforms, including in services and environmental goods needed to combat climate change.

“Together with domestic policies to help share the gains more widely, open trade—while
paying due attention to its possible adverse side effects—can promote balanced
growth and support cooperation on other global priorities, such as climate change,
food and health security, and poverty reduction,” the Fund quotes.

It added that the deteriorating global trade landscape poses risks to the current levels of
prosperity.

Trade tensions that have emerged in recent years have deep underlying causes. After rising sharply in the 1990s and early 2000s, the ratio of trade to GDP has been flat since about 2005. Following a stagnation of traditional trade reforms and limited take up of new opportunities in services and other emerging areas, trade restrictions, trade-distorting subsidies, and other distortive policy measures began to spread, especially in the aftermath of the global financial crisis.

“More recently, the trade tensions between China and the United States, the COVID pandemic, and the war in Ukraine have accelerated these trends. A weakened multilateral trading system has been ill-equipped to address these challenges.”